Study: Proposition 80 Would Give MA 2nd Highest Combined State & Federal Capital Gains Tax Rate in U.S.

Share on Facebook
Share on Twitter
Share on
LinkedIn
+

Read coverage of this report in the Boston Herald: “Study: ‘Millionaire’s tax’ would hurt state” and the Boston Business Journal: “‘Millionaires’ tax’ would make Mass. an outlier in capital gains tax, says group

Unlike federal government, gains could move taxpayers into higher state bracket 

BOSTON – If voters approve Proposition 80, scheduled to appear on the statewide ballot next year, Massachusetts’ top capital gains tax rate would go from 30th highest in the nation to fourth and the commonwealth’s highest combined state and federal rate would move from 25th to second, according to a new Policy Brief published by Pioneer Institute.

“Proposition 80 would have an outsized impact on capital gains,” said Greg Sullivan, the author of “Back to Taxachusetts Series: Capital Gains.”  “And one of the few things most economists agree on is that keeping taxes on investment low is critical to economic growth, job creation, and rising wages.”

The ballot initiative would put an additional 4 percent surtax on any annual income over $1 million.

Passage of the initiative would introduce an important difference between federal and state treatment of capital gains taxes.  The Internal Revenue Service essentially treats capital gains as separate from income tax rates in that capital gains income can’t push a taxpayer into a higher tax bracket.

Under Proposition 80, the 4 percent surtax would apply to all annual income over $1 million, meaning that capital gains income could push a taxpayer into a higher state bracket.

Under Proposition 80, the top state capital gains tax rate would rise from 5.1 percent to 9.1 percent.  In terms of national ranking, it would move Massachusetts from having the 30th highest top rate to the fourth.

Massachusetts’ highest combined state and federal rate would rise from 28.1 percent to 32 percent (states use different methodologies for calculating capital gains taxes, so the combined rate can’t always be determined simply by adding the state and federal rates).  In terms of its national ranking, Massachusetts would go from 25th to second.

Passage of Proposition 80 would also give Massachusetts the sixth highest capital gains tax rate in the world, behind just Denmark, Finland, France, Ireland, and California.

About the Author

Gregory W. Sullivan is Pioneer’s Research Director. Prior to joining Pioneer, Sullivan served two five-year terms as Inspector General of the Commonwealth of Massachusetts, and was a 17-year member of the Massachusetts House of Representatives. Greg is a Certified Fraud Investigator, and holds degrees from Harvard College, The Kennedy School of Public Administration, and the Sloan School at MIT.

About Pioneer

Pioneer Institute is an independent, non-partisan, privately funded research organization that seeks to improve the quality of life in Massachusetts through civic discourse and intellectually rigorous, data-driven public policy solutions based on free market principles, individual liberty and responsibility, and the ideal of effective, limited and accountable government.

Get Updates on Our Economic Opportunity Research

Research on Economic Opportunity:

Massachusetts Releases New Permanent Regulations for MBTA Communities Act

The April edition of The House Call provides an update regarding the MBTA Communities Act's implementation, with some communities amending their zoning via either referendum votes or Town Meeting this spring. The newsletter also includes a discussion of communities that have eliminated minimum parking requirements in recent years.

Historical Domestic Migration Patterns: Putting Massachusetts in Context

This week's edition of Mapping Mass Migration features an analysis of newly released data from the Census Bureau, its March supplement of the Current Population Survey. Our analysis covers how migration trends have played out nationally since 1948, including the demographics of movers, the extent of their migration (within a county, across counties, to another state, etc.), and the most common reasons movers cite for changing their primary residence. The newsletter concludes with a brief discussion of what might account for a decline in overall migration rates nationally and where Massachusetts fits in.

The House Call – Cambridge Adopts a Zoning Ordinance Allowing 4 to 6-Story Residential Buildings Citywide

The March edition of The House Call covers recent zoning changes in Cambridge that allow 4 to 6-story buildings on every residential lot. It also summarizes reform recommendations from a state commission tasked with advising the Healey administration on how to ramp up housing production.

Study: Inclusionary Zoning Helps Some, but Can Jeopardize Broad-Based Affordability

Policies often force developers to raise market-rate prices to compensate for losses on affordable units

Pioneer Institute Study Says MA Housing Permitting Process Needs Systemic Reform

Highlights Bureaucratic licensing process and appeals as areas to fix

Mapping Mass Migration – New 2024 Census Estimates Show Surge in Population Growth, With Considerable Caveats

This week's edition of Mapping Mass Migration will cover 2024 state population estimates and components of change from the Census Bureau, how trends are impacting Massachusetts, and an analysis of how a methodological change significantly impacted their estimates for net international migration from 2022 to 2024 and what that means for the number and demographic backgrounds of immigrants captured in the data.

Study Finds Bump in State Population Due to Changes in Census Bureau Methodology

BOSTON – State leaders cheered in January when the U.S. Census Bureau estimated that Massachusetts’ population grew by 69,000 in 2024, more than at any other time in 60 years. Unfortunately, a closer look reveals that the higher estimates are largely driven by a change in Census Bureau methodology designed to better capture the influx of humanitarian migrants.  

The House Call – Accessory Dwelling Units are Officially Legal Statewide in Massachusetts

This issue of The House Call covers Massachusetts' recent legalization of accessory dwelling units, as well as a bill filed in the state legislature last month that would broadly prevent localities from enforcing certain housing-related regulations.